Customer Interview

Affirm made buy now, pay later (BNPL) ubiquitous in the U.S. By leveraging real-time financial data and partnerships with companies like Plaid, they created powerful models for assessing risk and the consumer's ability to repay. They also gave consumers clarity by clearly explaining the all-in costs of repayment. This financial product was a recipe for success in a brand-new market that they helped create. 

In this interview from Plaid Effects with Jen Taylor, President of Plaid, and Libor Michalek, President of Affirm, we discuss how Affirm pioneered a new type of lending and how they’re using feedback to expand from the digital to the offline world. 

This interview has been edited for clarity and length. 

Taylor: Tell me about the journey that got you to Affirm. What was the genesis? 

Michalek: As we explored ideas about building honest financial products to improve people's lives, the genesis came from how we thought about creating a product, point-of-sale lending, and access to credit in real-time. Back in 2012, four technologies were coming together. 

It was mobile; everybody had a computer in their pocket. 

Ecommerce, where it became normal and practical to shop online.

Machine learning, which allowed us to model data to understand fraud, creditworthiness, and pricing at the point of sale. 

And data access, the data about consumer finances that allowed us to apply those models at the point of checkout—while the customer is making a decision based on the all-in cost.

The most important aspect for us was that sense of control, that ability for the customer to know the all-in pricing before making their decision. 

Taylor: Affirm pioneered buy now, pay later (BNPL) in the U.S. How did you get it off the ground, and how did you know when you had product market fit? 

Michalek: We iterated ideas on how these technologies would operate together and what we could do with them.

The first version was, at its core, what we do today. We put together a single offering with the customer putting in their name, phone number, email, and other information into the checkout and purchase option. They only supply information they already know. Then, we tell them how they can pay over six months, how much each payment is, and what the all-in cost will be. 

Simplicity drove adoption. The merchants understood how it improved their business while driving customer conversion and affordability. And it clicked with customers. From the first moment, customers told us that they loved the sense of control, understanding, and use of the product. 

Taylor: There’s nothing like a happy customer. You get unhappy ones as well. It's part of the job, the feedback, and the evolution. But seeing that customer delight is powerful.

Michalek: Negative feedback is as valuable as positive feedback. A lot of our ideas came from customers who expressed dissatisfaction with where they can use the product and why it’s available in one place but not somewhere else. That kind of feedback has propelled the team to expand where we deliver our products. Customer feedback made us a better company and a better team.

Taylor: The power and impact of the portfolio Affirm has built is astounding. Tell me about that evolution and what is most exciting for you next.

Michalek: The most exciting thing is that we've built out the surface area of capabilities, providing different ways to integrate with merchants at the point of sale through things like our virtual card. 

The customer has been our driving force for the last decade, and we expect that to continue. We continuously get feedback that the next frontier is offline. Also, ecommerce continues to grow.

We're excited about ecommerce because it still feels nascent, with single-digit penetration on an annual basis. But that is a drop in the bucket compared to the offline world. Building out the Affirm card to allow customers to access clarity and control in the offline world is really exciting for us.

Taylor: The Affirm card is super interesting to me. You've taken this closely integrated online product and pierced the fourth wall by leaving the digital device behind and enabling people to carry it into their physical world. What do you need to do differently as you move into that physical offline experience?

Michalek: A lot of what we did differently was listening to the customers to understand what they were seeking and already doing. We originally built a single-use virtual card for use in ecommerce where our product was not available. Customers either type in the numbers or cut and paste them into the site they're shopping on. They loved it, and it grew quickly, but we saw people figuring out how to use it offline.

It was awkward because it was a virtual card number. They'd have card-not-present conversations at the point of sale, but they were doing it, and it was growing. For us, it was how do we make that experience better? It doesn't take a rocket scientist to figure out—let's give them a physical card while preserving that sense of control from understanding the all-in cost.

So, we integrated the app into our customers' shopping journeys, even offline. Customers can plan their purchase, understand it clearly, and access it through the physical card. 

Taylor: It's been a privilege to partner with Affirm. We've really appreciated the work we've done together. I'd love to hear your perspective on our partnership and its evolution. 

Michalek: Part of our impetus was access to real-time financial data. Obviously, Plaid has been a great partner in that since almost the beginning. We started working together early in the company's life when we were understanding consumers’ cash flow and account balances and modeling their ability to repay. That's really been the basis of us working together. 

Our partnership expanded as we tried new products and ideas. Plaid has built new innovations, and we've continued to adopt them, especially for customers who don't have traditional credit profiles. Plaid allowed us to expand the types of users we’re able to interact with, especially segments of the population that have been traditionally underserved. That was exciting from day one, and we've continued to build on that as Plaid has released new capabilities. 

We’ve now collaborated on experiences, data, understanding, and capabilities in five areas of our product. It's been a wonderful partnership, and I expect to see it grow. 

Taylor: By leading the engineering product design functions within Affirm, you've built your career as an engineer. We've got an audience of people who are potentially early in their careers as product managers, engineers, or entrepreneurs. What advice do you have for them? 

Michalek: There are multiple aspects. If you're going to put in years of effort to build something, you have to be excited about it on multiple axes.

For me, as an engineer by training and at heart, it has to be technology-driven. Technology has to be the unlock—the thing that enables that product to exist—primarily because I want to feel that what I'm contributing matters to the team and what we're building.

And probably what’s most important is the team itself. These are people you're going to be spending every day with. They're also the people you're learning from. You learn by interacting, teaching, and osmosis. Are these the people you want to be with every day as you learn new things and develop your career?

When you put those together, it's powerful.